State of CarbonTech- Fall 2024

September and October are generally conference-heavy months every year. Traveling from the Decarb Connect conference (Boston), to the TD Securities conference,, the Climate Investments Annual Investor Meeting, a bunch of programming at NY Climate Week, and wrapping up with the Energy Disruptors Conference in Calgary and the CIBC Carbon Summit in Toronto was hectic but also profound in generating some important takeaways in the state of CarbonTech (i.e. CO2 Utilization/CO2-to-Value) solutions in the market.

I will preface the piece by acknowledging that I am a chemical engineer by training and apart from one course short of an economics minor, and reading books and articles on the subject, do not have any formal training in macroeconomic or financial history. The points intertwined in my takeaways below come entirely from my experience as the Co-founder CEO of a startup engaged with multiple strategic partners and financial investors, as well as a bunch of books I am generally reading.

Importantly, my experience through these two months was primed by a few important things that happened in the Summer months. As part of the World Economic Forum’s Tech Pioneers program, I had an opportunity to return to China after 6 years and listen to discussions on their economy, plans for growth, and adoption of new sustainability-focused technologies in Dalian.

Additionally, our projects and engineering team launched and participated in a Climate-tech focused Major Projects course with the Oxford Global Projects team, led by Dr Alex Budzier, Dr. Bent Flyvberg (author of the excellent, best-selling book, How Big Things Get Done; https://www.amazon.com/How-Big-Things-Get-Done/dp/B0B63ZG71H/ref=sr_1_1?s=books&sr=1-1 ), and the exceptional Dr. Michala Techau. This course was incredible in initiating the projects-focused community building that we’re keen on facilitating in the climate space, and also getting our team primed for CUT’s upcoming full-scale CCU (Carbon Capture & Utilization) facility installation with our partners, CRH, at Canada’s largest cement plant in Mississauga, Ontario.

Through the various events, and after a couple of weeks of slow and deliberate reflection, I have consolidated my takeaways to the following points. Mostly, they point a circumspect, cautious and frankly, muddled leadup to the 2nd half of the 2020s. If this indeed is the decade where we need to make meaningful impact on climate and sustainability, the zeitgeist today could not be starker from the 60s when Kennedy launched the Soviet-fearing, panic-struck States into the Space Race (An excellent listen on the topic https://podcasts.apple.com/in/podcast/the-moonwalkers-with-tom-hanks/id1537788786?i=1000651675423 ). The Rice University speech in 1962 led to the moon landing before the end of the decade, as demanded by the directive.

Today, we’re almost 9 years past from COP 21 in Paris (2015); an event that was meant to herald a similar sense of climate action and emergency. Although there are promising snippets of progress on a few fronts, the tough macroeconomic environment, lack of financing instruments to bridge high-impact technology from the lab to pilots and full-scale deployments, and geopolitical uncertainty coupled with social tensions in most major countries globally all create an environment with fleeting ambition and inspiration.

Contrast this with the urgency with which our planet is violently calibrating for a higher temperature. Hurricane Helene in North Carolina and Georgia, Otis in Mexico, flash floods in India and Spain, and the record heatwaves in Australia. It is ironic (and tragic) that we might be struggling as a species in the 21st century, despite (and perhaps due to) our advancement and progress, to keep up with the pace of Earth’s climatological evolution.

My Main Takeaways:

1. Heavy Industry Confusion- Confusion still persists on how heavy industry can decarbonize and many major players are divergent (and sometimes incoherent or non-existent strategies) on how they’ll decarbonize their core businesses. While the cement industry has identified and has a critical mass of players engaged in implementing critical decarbonization technology pathways, many other industries are still challenged to find these ways. As we approach 2025, the chasm between industries (and within them, companies) that see decarbonization as a lever to differentiate and offer something new to their clients is becoming evident and will, presumably, get more pronounced through the decade.
2. There is an ever-clear delineation between industrial players willing to take FOAK (First-of-a-kind project) risk and those that are not- Companies that do new things versus that don’t is almost always a function of corporate mandates, strategy and deep-seated internal company culture. It is clear from multiple interactions and presentations in the last couple of years that it is not simply strategic partnerships that are important for startup companies, but ensuring that these partnerships are with organizations that are tangibly/concretely going to engage at a multiple levels to realize a project. We are fortunate at Carbon Upcycling to have partnerships with various corporate partners that fit this profile. As the 2nd half of the 2020s begin, it stands to reason that the gap between corporates that leverage and/or build organizational muscle to carry out innovation versus those that don’t will become starker.
3. Banks are increasingly more actively engaged in CarbonTech- Banks are driving dollars towards their own Scope 3 emissions, investing in various funds to decarbonize, taking on mandates for clean tech and CarbonTech companies. This is promising and, inarguably driven (at least in part) by the tough market for later-stage companies transitioning into the public market and the slow acquisition market by corporates. In any event, this movement, if and as it persists, can be a clear difference from CleanTech 1.0- helping drive major corporations towards decarbonization from a finance angle in a way that was not evident between 2000 and 2015.
4. Pragmatic Investments and Technology Adoption- The pragmatic outlook that defined most of 2023 and 2024 since the interest rates began to rise are not just a fad and have fundamentally altered the mindset of the market- not just with institutional investors but even early-stage Venture Capital investors. With prolonged periods of holding stakes in their portfolio companies, and the slowdown of capital recycling back to LPs, the type of diligence exposed by financing and industrial players on what a technology offers, its business plan, and its fundamental economics is worlds apart from the investment philosophy that defined the ZIRP (Zero Interest Rate Policy) era. Even as interest rates are now beginning to drop across the board, there was almost no talk of green premiums in the last couple of months. Nor was there an interest from any market actors willing to look at technology that could not compete on current market prices, now or soon. It is quite plausible that the next 5 years will be focused almost entirely on technologies and pathways that can cost-effectively drive decarbonization in their respective industrial sectors, and Horizon 2 technologies, which might require more significant economic incentives to create a viable business case will only begin scaling truly over a lengthier time period.
5. Circularity is catching on in North America- At event after event, circularity and the diversion of waste were increasingly important themes. Given some of Carbon Upcycling’s work in Europe since 2022, the European focus on circularity and waste diversion has been evident to us for a period of time. It was encouraging to see this as a theme, particularly at New York Climate Week, most prominently at the event that Cemex hosted with CEO Fernando Gonzalo-Olivier and Bill McDonough (Author of Cradle-to-Cradle; https://mcdonough.com/cradle-to-cradle/ ) and their excellent discussion on the importance of circularity in driving sustainability.
6. The FOAK problem- The cofounder of IDEO, Bill Moggridge said “The only way to gain experience is by experiencing the experience”. In CarbonTech, and CleanTech generally, the only way to gain said experience is by building. Building and iterating and building again- quickly and smartly. Despite meaningful dialogue and system-wide recognition that we need to build and test new technologies faster and more ambitiously than ever before, mechanisms to enable the financing, team & stakeholder building for this to really take off is still missing. The Builder’s Vision team hosted an excellent session at the Goldman Sachs HQ in NY, bringing together a wide set of stakeholders to address the main painpoints in this particular valley of death. The current default for startups looking to scale their technologies past this stage is to raise large equity rounds (potentially creating major risk for common shareholders and investors), or engage with corporate partners and government funding agencies to substantially support the financing of these projects. The onus remains on the startups to find ways to build well, safely, and quickly, and with tight financial constraints while managing a complex set of stakeholders. Our strategy at Carbon Upcycling has been to rapidly advance the technology through smaller-scale, more affordable offerings, and move the company to a place where the technology can get close to being “bankable” (our first full-scale facility will begin commissioning in mid-2025). This is, however, very unusual and not necessarily actionable advice for many important technologies, particularly in heavy industry. Without new creative financing instruments coming to the fray at this phase, it is quite plausible that some of the best technology solutions to help us rapidly and meaningfully decarbonize will never see the scale they need to achieve. It is more important than ever to find investors and corporate partners that are willing to take calculated medium- to long-term bets, with a horizon to 2030 and beyond. The best technologies and startups today will only seem obvious in 4–5 years from now.
7. Factory America & Factory Europe is perhaps the only bipartisan issue today in the West- In the 1990s, it was a change of trade rules and regulations between the US and Japan that limited the scale of exports from Japan to the US, subsequently flooding the dormant capital into the Japanese property markets and creating a major bubble. Niall Ferguson discusses the same dynamic in his book, the Ascent of Money (https://www.amazon.com/Niall-Ferguson/dp/0143116177 ), that has been evident between China and the United States since the mid-90s. There is almost no doubt that the future will be less of the “Chimerica”, and more of Factory America (and similarly Factory Canada and Factory EU) that John Miller from TD described in a fascinating discussion on US economic and climate policy in this turbulent time. The notion of Factory America does not necessitate that collaboration, particularly in the realms of clean technology development, transfer, and scaleup, cannot be done in an equitable manner. Technologies and companies that in-source production of important commodities into the US, Canada, and the EU will be favorably viewed and (actively supported, to the extent possible and viable) almost regardless of which way the political winds ultimately turn.

I will finish by saying that although the dynamics between the US and China are fundamentally changing, there are similar challenges in both countries. Dalian, which hosts the Asian Davos every couple of years, was a small fishing town in 1950 and is now home to over 5 MM people. Contrast this to New York, with its history dating back to the early 1600s as Dutch colonial post, and now home to 8 MM people. No two concrete jungles/cities are the same but the challenges discussed in both starkly different locations around decarbonization were almost exactly the same- how do we reduce emissions and improve sustainably? How do we do it affordably, equitably, and while improving the state of the local workforce, communities, and without being wiped out by a globally competitive marketplace? It is conceivable that the tangible imports from China into the West become increasingly replaced by IP and technological know-how flowing opposite to what has been the norm in the last 50–60 years.

Just like with FOAK project financing, however, the playbook for this kind of playbook on multinational collaboration remains to be written.